Market Perspectives June 21, 2013

Outlook: On June 7 this report commented that the July 2013 contract was likely to trade up to the $6.70-6.90 range. That price behavior happened this week. It was also noted that such a price spike could be a selling opportunity for the remaining old crop feed grain stocks. A number of producers seemed to share that opinion, as movement did increase in the cash grain market, causing interior basis levels to weaken somewhat. It was also noted last week that there is time for a limited sell-off and corresponding rebound in corn contracts prior to USDA’s June 28 reports. Such an event may occur. We believe the spread between old crop and new crop contracts is likely to become increasingly volatile and to compress at some point.

The final price of the July 2013 contract will be heavily dependent upon USDA’s Grain Stocks report that is scheduled to be released next Friday, along with the Acreage report. Several farmers have expressed their intent to wait and see if the Grain Stocks report contains a bullish surprise before marketing the remainder of their old crop feed grains. That strategy could pay off; however, the September contract is increasingly assuming the role of the nearby contract for local elevators as the open interest in the July contract declines. Under such conditions, it could be possible for a producer to correctly call the high of the market and still receive a lower price.